Report to Stockholders

By Patricia A. Woertz, Executive Vice President, Global Downstream
ChevronTexaco Corporation

2004 Annual Meeting of Stockholders

San Ramon, California, April 28, 2004

Also see a press release regarding this speech.

I am pleased to report to you on our strategy to create a highly competitive global downstream business and to discuss our accomplishments in 2003 as well as our plans for the future.

Downstream comprises ChevronTexaco's refining, fuel and lubricants marketing, trading, and transportation activities.

Our downstream strategy is to improve returns by focusing on areas where we have a competitive supply position and strong brand recognition. Specifically, those areas are the North American West Coast, the U.S. Gulf Coast, Latin America, Asia and sub-Saharan Africa.

Globally, we are in 180 countries, with more than 20,000 employees. We manufacture more than 2 million barrels a day of refined products, in 21 wholly owned or joint-venture refineries. We market motor fuels through more than 24,000 retail outlets, and market lubricants through a global network. And each day, we serve millions of customers throughout the world.

For Global Downstream, our performance in 2003 was greatly improved.


In refining, we significantly enhanced our operations. For example, at two of our largest refineries here in California — Richmond and El Segundo — we improved our utilization rate, improved our safety record and improved our environmental performance. The processes and practices that contributed to these results are now being implemented throughout our global refining system.

We also upgraded our refineries at Pascagoula, Miss., at Pembroke in Wales, and at our joint-venture refinery in Rotterdam, Netherlands — all to produce low-sulfur fuels to meet more stringent environmental standards.

At our Pembroke Refinery, we have made modifications — at a modest capital cost — to process the difficult-to-refine crude from the Doba Field in the Republic of Chad. These modifications allowed us to capitalize on our partnership with Upstream to enhance the value of this crude.


Turning to marketing, we continued aggressive efforts to strengthen and leverage our brands.

We offer three of the most trusted fuel brands in the industry:

  • Chevron — which is particularly strong in the U.S. Sunbelt states;
  • Texaco — in Latin America and Europe;
  • Caltex — which is a market leader in South Korea, Southeast Asia and South Africa.

In 2003, the Chevron and Texaco motor fuel brands were ranked by two independent industry surveys as having the highest brand value in their U.S. retail gasoline markets.

And our lubricants products continue to meet customer needs and achieve distinction in the marketplace. Our lubricants business increased its U.S. sales volumes by 10 percent despite an overall industry decline. We also maintained our No. 1 position in premium base-oils on the U.S. West Coast.

Business Strategies

We achieved these results while restructuring the Downstream organization to improve our competitive position. We have transformed from a geographic structure to a global, functional business model.

With this new organization, we are lowering costs, implementing best practices very aggressively, increasing standardization to achieve much greater efficiencies, and optimizing our supply chain throughout the world.

Also in keeping with our strategy, we have refocused our portfolio and are upgrading assets. We are concentrating investments in strategic areas which offer opportunities for significant growth. And at the same time, we are selling nonstrategic assets where market conditions make it advantageous to do so.

In 2003, we sold our El Paso Refinery and converted our Batangas refinery in the Philippines to a product import terminal. We also began the process of selling about 1,500 company-owned or -leased service stations to retailers — most of whom will continue to market under the Caltex, Chevron or Texaco brand.

Looking Ahead

This year, we are taking further steps to strengthen our position in our strategic markets. We recently announced plans to increase our ownership in the Singapore Refinery, which is well positioned to serve growing Asian markets.

As we look ahead, we intend to fully capture the benefits of our global downstream strategy. Our commitment is to deliver at least $500 million in pre-tax earnings improvements by the end of 2005 and to continue strong operating performance now and in the future.

Read full text of Chairman David O'Reilly's remarks to 2004 Annual Meeting of Stockholders

Read full text of Vice Chairman of the Board Peter Robertson's remarks to 2004 Annual Meeting of Stockholders

Updated: April 2004